Likely breather for airlines: Plan to impose 2% levy on air tickets may be deferred

New Delhi: The Government today indicated that it will not go-ahead with its plan to impose two percent levy on domestic and international air tickets and may explore other means to raise funds for boosting regional air connectivity.

The government in the revised draft policy, unveiled on October 30, had proposed 2 percent levy on all airfares to mop up funds for its regional connectivity scheme.

Reuters

The proposal has, however, been opposed by various stake holders on the ground that an additional charge would only increase the ticket prices with the global airlines body IATA terming it as "against the International Civil Aviation Organisation's norms."

"The manner of raising that resource (funds for Viability Gap Funding) that the draft policy proposes by levying 2 percent cess is something that we are discussing," Civil Aviation Secretary R N Choubey said today.

The government had earlier planned to levy the proposed cess from January this year, however, it deferred the move due to its failure to finalise the draft civil aviation policy. Regional Connectivity Scheme is one of the thrust areas of the draft policy.

Choubey said that the ministry had received the stakeholders comments, and "therefore we are discussing the manner in which the funds required for viability gap funding will be raised."

He said that regional connectivity can't take place unless there was "collective" money to do so. "There is a need for collective money for VGF because the regional connectivity is not likely to happen without VGF," he said.

He also said that the airfares in the October-December quarter of last year declined by 18 percent compared to the same period of 2014 on account of cheaper jet fuel, adding that aviation turbine fuel fell by about 35 percent in the last one year.